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Price and marginal cost effects of on-time performance: Evidence from the US airline industry

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  • Yimga, Jules

Abstract

We examine the impact of flight delay on market power in the U.S. airline industry. Consistent with the literature, our estimation results confirm that flight delays are associated with negative consumer welfare effects. Most importantly, we find that poor on-time performance negatively impacts product markup—proxy for market power. Furthermore, we are able to decompose these markup effects into price and marginal cost effects and evidence suggests that the source of these negative markup effects is primarily driven by negative price responses.

Suggested Citation

  • Yimga, Jules, 2020. "Price and marginal cost effects of on-time performance: Evidence from the US airline industry," Journal of Air Transport Management, Elsevier, vol. 84(C).
  • Handle: RePEc:eee:jaitra:v:84:y:2020:i:c:s0969699719304284
    DOI: 10.1016/j.jairtraman.2020.101769
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    References listed on IDEAS

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    More about this item

    Keywords

    Airlines; Market power; Flight delay; Consumer welfare; Nested logit;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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